branching out 10 questions for inbound u.s. investorsglobal growth strategy? the starting point:...

Branching out10 questions for inboundU.S. investors

Table of contents

Question zero 1

How does making or increasing a U.S. investment fit with your global growth strategy? 4

Should you acquire or go greenfield? 7

If you acquire, what’s the right target? What’s the right price? 11

If you go greenfield, where is the right place in the United States to invest? 15

What tax considerations will you have to manage? 20

How will you navigate the U.S. regulatory landscape? 23

How can you compete? 27

What talent challenges and opportunities should you focus on? 32

What brand challenges does your investment present? 36

Once the deal is done, what’s your plan to drive synergies and generate sustainable shareholder value? 39

Your move 44

Question zero

If you’ve opened this document, you probably have already made a big decision about investing in the United States: You plan to do it.

At a minimum, you’re considering it. Maybe you are investing in the United States for the first time, or maybe as an addition to a growing U.S. portfolio. In either case, you will be in plentiful company.

Doing business in the United States means participating in an almost $16 trillion economy, the world’s largest, where 5 percent of the world’s population generates 30 percent of global output. It also places an investor within the North American Free Trade Agreement (NAFTA), one of the world’s largest free-trade blocs. Taken individually, many states of the United States are large enough to be world powers: If they were independent nations, California, Texas, and New York would rank among the globe’s 18 largest economies.1, 2

Despite everything that has happened to the U.S. economy in the past several years, the United States leads the world in inbound investment by a wide margin. Investors from other countries committed more than $234 billion inside the United States in 2011,3 and the country’s stock of foreign direct investment totals more than $2.8 trillion.4

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Question zero

If you’ve opened this document, you probably have already made a big decision about investing in the United States: You plan to do it.

At a minimum, you’re considering it. Maybe you are investing in the United States for the first time, or maybe as an addition to a growing U.S. portfolio. In either case, you will be in plentiful company.

Doing business in the United States means participating in an almost $16 trillion economy, the world’s largest, where 5 percent of the world’s population generates 30 percent of global output. It also places an investor within the North American Free Trade Agreement (NAFTA), one of the world’s largest free-trade blocs. Taken individually, many states of the United States are large enough to be world powers: If they were independent nations, California, Texas, and New York would rank among the globe’s 18 largest economies.1, 2

Despite everything that has happened to the U.S. economy in the past several years, the United States leads the world in inbound investment by a wide margin. Investors from other countries committed more than $234 billion inside the United States in 2011,3 and the country’s stock of foreign direct investment totals more than $2.8 trillion.4

However, each of those dollars may have followed a different path to its destination somewhere in the U.S. economy. Each may be doing a different job, in a different setting, with a different ultimate return to the organization that invested it. To chart the path your U.S. investment dollars will follow, it’s time to ask the rest of the questions.

The United States is famously diverse – but not only in its population. Landscapes, climates, micro-economies, and legal jurisdictions overlap to create an almost infinite number of situational business conditions. If you’ve decided to invest, the next steps are to decide when, where, and how – and to proceed with a firm sense of why.

Don’t let the title of this document mislead you. There are certainly more than 10 questions U.S. investors should consider asking. But each of these 10 can lead to at least 10 more … and 10 more … and so on. As long as you have a single dollar invested in the United States, you likely won’t run out of questions to explore. This is a place to begin.

Branching out 10 questions for inbound U.S. investors 2

1.How does making or increasing a U.S. investment fit with your global growth strategy?

The starting point: What is your overall global growth strategy?

Answering that question forms the basis for whether a U.S. investment is a priority for executing your strategy. Are you trying to get closer to customers and markets you already serve? Are you looking to expand your product portfolio or research and development base? Or, are you seeking U.S.-based brands, customer segments, technology, or knowledge and management talent?

Knowing what you hope to get out of the investment is only a starting point. You also need a plan for the lifespan of the commitment, all the way through realizing its full value. Try to think as far ahead as you can to realize as much upside potential and mitigate as many surprises as possible.

The ongoing strategy will likely be different depending upon whether you’re expanding an existing U.S. presence or starting a brand-new one, so it is important to consider subsequent opportunities that your investment may create.

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1.How does making or increasing a U.S. investment fit with your global growth strategy?

The starting point: What is your overall global growth strategy?

Answering that question forms the basis for whether a U.S. investment is a priority for executing your strategy. Are you trying to get closer to customers and markets you already serve? Are you looking to expand your product portfolio or research and development base? Or, are you seeking U.S.-based brands, customer segments, technology, or knowledge and management talent?

Knowing what you hope to get out of the investment is only a starting point. You also need a plan for the lifespan of the commitment, all the way through realizing its full value. Try to think as far ahead as you can to realize as much upside potential and mitigate as many surprises as possible.

The ongoing strategy will likely be different depending upon whether you’re expanding an existing U.S. presence or starting a brand-new one, so it is important to consider subsequent opportunities that your investment may create.


Questions behind the questions

• If you weren’t investing in the United States as planned, what would you prioritize instead – investing at home, in another overseas market, or not at all? Why?

• As you consider entering or expanding in the United States, what are potential pathways for growth? Why are some preferred over others? Will your first or next investment become a platform for future deals and advantaged growth?

• Will your U.S. investments allow you to be more advantageously positioned versus current competitors and other likely entrants, and allow you to capture and serve customers in ways you cannot today?

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Not just for the big players anymore

Mid-market companies are seeing new opportunities and capabilities in cross-border investing. Decision-making agility is an advantage they’ve normally had. Now, they’re responding to other factors by moving onto a global stage.

Growth up the value chain: Because the U.S. market is comparatively fluid and fragmented, smaller players can find opportunities here to invest in “upstream” activities that can capture more value.

Performance improvement: True, the United States often has higher wages and corporate tax rates. But its technology and knowledge capabilities may present the chance for enhanced operating efficiency and productivity – gains that may be too attractive to pass up.

Talent access: The United States offers research institutions and top universities. Its educated talent pool judges prospective employers by culture, work environment, and opportunity – not just size.

Do it nowIf you’re reading this, you’re probably far along in planning to make a U.S. investment. Perform this thought experiment: Write down – don’t just imagine – a plan for how you’d pursue your growth goals if the U.S. opportunity were to disappear. What’s different?

Deloitte contacts

Mark Sirower Steve JoinerPrincipal PartnerDeloitte Consulting LLP Deloitte & Touche LLP+1 212 313 1595 +1 404 220 [email protected] [email protected]


2.Should you acquire or go greenfield?

The answer to this question can depend upon a combination of many factors. They won’t all necessarily point in the same direction, but it’s important to weigh each in your decision process.

In the case of an acquisition, how similar is your product line to that of the target? Are there issues with proprietary or sensitive technology? What place will the U.S. venture occupy in your global structure? What is the scope and difficulty of the integration task that you’d be taking on? How relevant is the cultural gulf between the two groups you intend to knit into a team? And at what pace should you move?

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With a greenfield investment, it’s important to evaluate your own organization’s degree of experience doing business in the United States and the scale of the entry you’re attempting. Do you have the strengths in management and technical competence, or are you looking to bolster one of these areas? And what type of greenfield move are you considering: licensing, a joint venture, or starting a new entity from the ground up?

Generally, acquisitions can get you into the market in a more timely manner and help you pre-empt competitors. But the price tag is hard to quantify because considerations such as stay agreements, management recruiting, and integration carry their own costs. An acquisition also depends on synergy capture. In contrast, greenfield investments make it easier to stage or phase commitments which gives investors more direct control over risk management. However, it takes longer to build something new than to add it to your organization with the stroke of a pen.

2.Should you acquire or go greenfield?

The answer to this question can depend upon a combination of many factors. They won’t all necessarily point in the same direction, but it’s important to weigh each in your decision process.

In the case of an acquisition, how similar is your product line to that of the target? Are there issues with proprietary or sensitive technology? What place will the U.S. venture occupy in your global structure? What is the scope and difficulty of the integration task that you’d be taking on? How relevant is the cultural gulf between the two groups you intend to knit into a team? And at what pace should you move?


Pros and cons of going greenfield

No two investments face the same challenges or decisions, but it’s possible to generalize about some of the ways a choice of investment mode affects the project’s overall chances.

Advantages of greenfield investing

• Physical and organizational structures are tailored to your particular needs and are up to date.

• There’s nowhere to go but up — a new operation can’t show a dip in sales or performance compared to previous owners because a new operation has no history.

• A new enterprise means new jobs, which helps cement local goodwill.

• Where regulatory barriers limit an investor’s ability to acquire technology or resources, a greenfield investment lets the company bring or build its own.

Disadvantages of greenfield investing

• Building from scratch takes more managerial and liquid financial resources, which makes it hard to grow. An acquirer can often grow more efficiently.

• Greenfield investors don’t acquire experience or customer goodwill, so they must create these from the start.

• The acquired business is a going concern ready to operate and create profit from Day One. A greenfield enterprise takes time to stand up – and competitors are watching.


• Are the customers, suppliers, and service providers you’ll work with in the United States ready for a “new face” in the market, or is their comfort with an existing entity an asset?

• Is it more important for your U.S. operation to prosper on its own terms as a market presence or for it to serve the larger needs of the global organization?

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Do it nowIf you’re considering this choice, you probably aren’t operating in a vacuum. Compare the top handful of acquisition targets on your list with the top handful of greenfield opportunities. Which ones offer:

• The more timely assimilation into your target market?

• The easier route to capital repatriation?

• The preferred security for your processes and knowledge?

• The more favorable tax advantages?

Deloitte contact

Darin Buelow PrincipalDeloitte Consulting LLP+1 312 486 [email protected]


3.If you acquire, what’s the right target? What’s the right price?

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The first decision in an acquisition can be the most important: whom to acquire. Going down a road after the wrong target can be a significant drain on organizational resources even if a deal never takes place. If you do commit, a false step can stick with you for a long time. Even worse, you may miss a universe of opportunities that were closer fits in the first place.

Start by getting your senior team aligned on the strategic criteria that matter most to you. Then develop a long list of relevant prospects and filter that list to create a short list of priority targets. That sounds easy, but those filters are choices that represent your strategy. At the outset, there’s little risk in considering too many targets.

Of course, the often most important near-term criterion is the price you’ll pay. Whether financed by cash or leverage, it should compare favorably to your anticipated return. When operating across borders, currency questions apply at the time of sale and later on when you’ll be trying to realize the value you sought in the first place.

It’s important to treat price and strategy as related elements. Due diligence is critical, and your CFO will be at center stage – not only to help analyze the assumptions behind the initial transaction but also to help preserve and create value as the new entity moves forward. A “good” price for an investment that doesn’t advance your enterprise goals may turn out to be wasted money and a distraction from your strategy.

3.If you acquire, what’s the right target? What’s the right price?



• What are your chief acquisition criteria: sustained earnings, presence in a certain market or geography, ownership of intellectual property, new products, or something else?

• What are the specific deal issues that can have the biggest impact on valuation and return?

• Will the target require a cash infusion to operate even after you’ve paid to own it? Will that add to your debt load?

• Who else is competing to acquire your target? Do you have alternatives?

• What cultural issues will influence your post-merger operations?

• Are your accountants and theirs speaking the same language?

• What do you know about the people behind the brand you’re thinking of acquiring?

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Common pitfalls in deal valuation and modeling

Many companies mistakenly use a deal model to justify a deal price rather than truly evaluating the transaction. When building the deal model, it is critical not to solve for the desired answer.

Management teams should use the deal model and valuation as tools to not only evaluate the value of the target but also to test specific risk areas in the transaction. How sensitive are certain variables in the deal? How do they affect the outcome and returns of the overall transaction?

Marrying the information learned from running sensitivities on the deal model with development of specific terms in the transaction documents can help the deal team mitigate some of the risk in the transaction. It can also be a tool that helps them begin planning for diligence and integration.

Do it nowYour senior team should be aligned on strategic priorities for M&A. Write down five criteria your acquisition should satisfy to be worthwhile in your eyes. Then write down five deal breakers that may likely disqualify a target, no matter how attractive in other ways.

Deloitte contacts

Justin Silber Mark Sirower Principal PrincipalDeloitte Financial Advisory Services LLP Deloitte Consulting LLP+1 404 942 6960 +1 212 313 [email protected] [email protected]


4.If you go greenfield, where is the right place in the United States to invest?

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The many government jurisdictions, economic zones, land types, and even climates within the United States can make investment location a complex puzzle.

Simply listing the factors to consider can be dizzying. What transportation networks will you need to use, and how far can you be from suppliers, customers, or your own affiliates? What are the costs of real estate, infrastructure, and energy? To what extent will governmental authorities tax your investment – or incentivize it with grants? Then there’s talent: Where can you find the skills you need at rates that satisfy both your budget and the local cost of living? What rules govern unionization in the state you’re considering?

This is a job for systematic analysis. Consider each candidate location along three axes. One axis measures operating costs, such as labor, transportation, utilities, real estate, and taxes. The second captures your assessment of business conditions, ranging from scalability and sustainability to market access, regulatory burdens, and whether you’re a pioneer. And the last axis? That’s for wild cards like politics, the health of the economy, and potential natural disasters. Using a system like this, you can assign an aggregate score to each option to facilitate your decision process.


• What physical factors may tie you to a certain type of location, such as navigable water, special talent needs, or growing conditions?

• Will you be going it alone, or should you work with a partner?

• What elements of your business plan could you have to abandon or adjust if you were forced to adopt your fifth choice of location?

4.If you go greenfield, where is the right place in the United States to invest?


Do it nowTry the three-axis exercise (cost, conditions, and risk) for a U.S. location you’re considering for greenfield investment. What factors surprised you? Which ones were you unable to learn without paying for research?

Deloitte contact


Virtual vs. physical

Where in the United States can an inbound investor find qualified engineers? And what are the manufacturing wages in those and other places? The two data layers on this map represent only a fraction of the geographic questions that should precede an investment inside the United States.

Manufacturing Wages by County

# Engineers by County

High

Moderate

Low

50,000

25,000

5,000

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Sources: Ateryx, Q1 2012 (Engineers); Bureau of Labor Statistics, Q4 2011 (Wages)

Do it nowTry the three-axis exercise (cost, conditions, and risk) for a U.S. location you’re considering for greenfield investment. What factors surprised you? Which ones were you unable to learn without paying for research?

Deloitte contact



5.What tax considerations will you have to manage?

The U.S. federal income tax is one of the highest in the world, and the federal tax rate of 35 percent is just the beginning. Many states and local governments also impose income tax on business entities. Therefore, your U.S. entity’s real Effective Tax Rate (ETR) and its cash tax rate can vary greatly depending upon circumstances, jurisdictions, and important tax structure choices you make at the outset of the investment.

The tax liability of a U.S. investment may also vary depending upon its legal structure. Therefore, entity choices such as a standalone corporation, a partnership, or a branch, or in some circumstances, a hybrid entity (an entity recognized as one type for U.S. tax purposes and another for non-U.S. purposes), are important decisions.

A multinational that purchases an existing U.S. group has myriad tax issues to confront. For example, in many circumstances the multinational may end up creating a “sandwich” structure where the multinational enterprise owns a U.S. entity that in turn owns other non-U.S. entities. This type of structure can be inefficient from a tax perspective because unlike many countries, the United States taxes offshore income. It takes planning to mitigate the inefficiencies.

In addition to corporate tax, investors should know that operating in the United States can also involve other taxes like sales and use taxes, local property taxes, and personal income tax for U.S. nationals and foreign nationals.

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5.What tax considerations will you have to manage?

The U.S. federal income tax is one of the highest in the world, and the federal tax rate of 35 percent is just the beginning. Many states and local governments also impose income tax on business entities. Therefore, your U.S. entity’s real Effective Tax Rate (ETR) and its cash tax rate can vary greatly depending upon circumstances, jurisdictions, and important tax structure choices you make at the outset of the investment.

The tax liability of a U.S. investment may also vary depending upon its legal structure. Therefore, entity choices such as a standalone corporation, a partnership, or a branch, or in some circumstances, a hybrid entity (an entity recognized as one type for U.S. tax purposes and another for non-U.S. purposes), are important decisions.

A multinational that purchases an existing U.S. group has myriad tax issues to confront. For example, in many circumstances the multinational may end up creating a “sandwich” structure where the multinational enterprise owns a U.S. entity that in turn owns other non-U.S. entities. This type of structure can be inefficient from a tax perspective because unlike many countries, the United States taxes offshore income. It takes planning to mitigate the inefficiencies.

In addition to corporate tax, investors should know that operating in the United States can also involve other taxes like sales and use taxes, local property taxes, and personal income tax for U.S. nationals and foreign nationals.


Know the price of your neighborhood

The United States is a single nation but also a federal union of states with their own governments. This produces regional policy differences, including tax variations that may not occur naturally to people used to operating in more centrally governed countries. These tax authority differences also can extend to counties and municipalities.

However, this variability can be a positive. One jurisdiction may have higher tax rates than another, but local authorities in the United States are as keenly aware of these differences as you are – and they often compete for inbound investment. That can result in established programs such as defined business zones, or even in specific agreements between a local government and a single investor. With job growth a perennial policy driver, inbound investors may find themselves able to negotiate certain parts of their tax liability. It is critical to negotiate these matters up front, before finalizing an investment decision.


• Will you raise capital through debt or by contributing equity? Interest payments have one tax impact. Dividend payments have another.

• If a transaction will be debt-financed, how will you introduce the debt into your global structure?

• What will be the breakdown between U.S. nationals, parent-country nationals, and other people working in the U.S. investment location?

• What moves toward entity simplification, on either side of a border, can help your eventual combined organization avoid unnecessary taxes?

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Do it nowConsider scheduling lunch with the C-level officer in your organization who is responsible for tax planning. Ask what considerations he or she is applying to the calculus of your planned acquisition – and work to identify ones you’re missing.

Deloitte contacts

Robert Stricof Betsy EvansPartner PartnerDeloitte Tax LLP Deloitte Tax LLP+1 212 436 2262 +1 404 631 [email protected] [email protected]


6.How will you navigate the U.S. regulatory landscape?

The United States is an open market economy with a complex, multilayered government system. The country welcomes foreign direct investment, but potential investors should be prepared for a range of regulatory processes at the federal, state, and local levels.

Some of the rules are strictly functional. Other can bring national security, criminal law, and even politics into play. The effort required to meet U.S. requirements can range from filing the right paperwork to making structural or operating model changes. For example, an organization may need to establish legal entities or obtain licenses.

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At the federal level, investors may have to win approval from the Committee on Foreign Investment in the United States (CFIUS) and the Department of Defense. In banking, the Federal Reserve must weigh in. Investors may have to satisfy environmental, labor, securities, anti-money laundering, or export control regulations. Depending upon their entity structures, they may also be subject to the Foreign Corrupt Practices Act. State and local governments may impose other rules that influence decisions such as land use, workforce diversity, regulatory reporting, and environmental behavior. The laws that govern labor unionization vary from state to state as well.

This complex system of overlapping laws and jurisdictions can be a new experience for investors whose home countries are governed more centrally. Each of the regulatory hurdles can be managed with proper diligence – and managing them all simultaneously can take diligence to a new level.

6.How will you navigate the U.S. regulatory landscape?

The United States is an open market economy with a complex, multilayered government system. The country welcomes foreign direct investment, but potential investors should be prepared for a range of regulatory processes at the federal, state, and local levels.

Some of the rules are strictly functional. Other can bring national security, criminal law, and even politics into play. The effort required to meet U.S. requirements can range from filing the right paperwork to making structural or operating model changes. For example, an organization may need to establish legal entities or obtain licenses.



• You’re working to understand how to comply and gain regulatory approval. Have you calculated the cost of these efforts?

• Beyond your own activities and holdings, is there something in your business partnerships or alliances that could color U.S. regulators’ view of your investment?

• How can you structure your plans to make the elements subject to regulatory review severable from other parts of your deal you can’t do without?

• Does your home country have a reciprocal relationship with U.S. regulators that will influence your investment plans?

• Does the company you’re buying provide any products or services to the U.S. government?

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CFIUS – a marathon, not a sprint

The metaphor of regulatory requirements as “hurdles” breaks down in one respect: A hurdle is something you clear in an instant (or don’t) and then leave behind you. However, when overseas investors must manage compliance with the CFIUS, they should look at it as a process, not a single event.

The lifecycle of a CFIUS engagement has several discrete steps:

Pre-deal due diligence. The applicant-to-be identifies issues CFIUS is likely to raise about the planned transaction and frames strategies to mitigate them.

NSA negotiation. The applicant and CFIUS negotiate National Security Agreements (NSAs) and supporting deals.

NSA implementation. In completing the proposed acquisition or startup, the investor makes sure the resulting company complies with the NSAs and other agreements in place with CFIUS.

Ongoing audits. Long after initiation of the U.S. investment, the company and its parent remain responsible for maintaining compliance with CFIUS rules and agreements. Fines and investigations remain a possibility at any time.

Because interaction with CFIUS is structured in this way, inbound investors should have a long-term plan for considering and mitigating possible U.S. national security concerns, and an ongoing system for documenting compliance.

Do it nowIdentify three deals materially similar to yours and look up the history of their passage through the U.S. regulatory system.


Deloitte contact

Andrew M. Walker DirectorDeloitte Consulting LLP+1 703 251 [email protected]

Deciding to invest anywhere is principally about what the target market can offer the investor. If there were no rewards to reap, there may likely be no point in making the commitment. To prosper, however, an inbound investor should turn the lens around and ask – like any business – what it has to offer to the U.S. market.

The first place to look for an answer is in differentiation. What can you provide to the U.S. market that no other company is currently offering? Who else is already there, or soon to be there, with an offering that competes with yours? Is there room for everyone? If not, are you confident you can crowd out the competitors instead of the other way around?

Often, an investor’s foreign status creates different value that U.S. competitors don’t match – thanks to intellectual property, advanced manufacturing processes, advantages in materials sourcing, or the power of culture. In other cases, a foreign investor will have to slug it out with other participants in the U.S. market on more or less equal footing.

Beyond market share, there are operational questions. Even if production, marketing, and sales are a well-oiled machine in the home country, different conditions for the U.S. operation might force some complex decisions. What will be the role and design of Enterprise Resource Planning (ERP) systems in the U.S. entity? Will you use an e-commerce model, outside sales, or boots on the ground?

Because of wider competition and differences in media and culture – particularly a tradition of informed consumerism that is now more than a generation deep – the U.S. market may be more sophisticated in a given sector than the one an investor is accustomed to serving back home. Creating an offering with value takes work. But securing a place for it in the United States may take intricate groundwork.

7.

How can you compete?

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Deciding to invest anywhere is principally about what the target market can offer the investor. If there were no rewards to reap, there may likely be no point in making the commitment. To prosper, however, an inbound investor should turn the lens around and ask – like any business – what it has to offer to the U.S. market.

The first place to look for an answer is in differentiation. What can you provide to the U.S. market that no other company is currently offering? Who else is already there, or soon to be there, with an offering that competes with yours? Is there room for everyone? If not, are you confident you can crowd out the competitors instead of the other way around?

Often, an investor’s foreign status creates different value that U.S. competitors don’t match – thanks to intellectual property, advanced manufacturing processes, advantages in materials sourcing, or the power of culture. In other cases, a foreign investor will have to slug it out with other participants in the U.S. market on more or less equal footing.

Beyond market share, there are operational questions. Even if production, marketing, and sales are a well-oiled machine in the home country, different conditions for the U.S. operation might force some complex decisions. What will be the role and design of Enterprise Resource Planning (ERP) systems in the U.S. entity? Will you use an e-commerce model, outside sales, or boots on the ground?

Because of wider competition and differences in media and culture – particularly a tradition of informed consumerism that is now more than a generation deep – the U.S. market may be more sophisticated in a given sector than the one an investor is accustomed to serving back home. Creating an offering with value takes work. But securing a place for it in the United States may take intricate groundwork.


Drill down for sector specifics

In assessing the U.S. marketplace and finding your place within it, there is no shortage of broad lessons to apply. However, it’s just as important to learn the ways the U.S. market in your sector differs from the version you’re accustomed to operating in already.

For example, tech and media companies that intend to establish footholds in the United States should prepare for a sharply accelerated pace of change. Trends in market share and revenue can be volatile in that industry, and fortunes are fleeting. A foreign company may think its diligence indicates a stable investment target with reliable assets – and it could change before close.

It’s also important to train that sector lens on the talent market – because talent is a marketplace, too, nowhere more than in the United States, where talent is more mobile and more receptive to opportunities with other employers. And to some people, the prospect of working for “foreign” owners may not align with their entrepreneurial mindset.

No matter what industry or sector you’re in, moving to the United States means asking tough questions about market competitiveness. The things you don’t learn now may become the surprises that threaten your plans later.

Do it nowImagine your company is a U.S. enterprise and that your planned investment won’t cross any borders.

• Sketch a version of your business plan based on this imaginary change. How do you rate your chances in the U.S. market?

• Identify the inflection points where this imaginary plan deviates the most from the real one you’re pursuing as a non-U.S. investor. Are these the specific differentiators that will help determine your market value?

Deloitte contacts

Marco Sguazzin Steve JoinerPrincipal PartnerDeloitte Consulting LLP Deloitte & Touche LLP+1 415 783 6860 +1 404 220 [email protected] [email protected]


• What have you done to understand the U.S. customers you’ll be courting? How might you meet their needs and habits knowing that they may differ from those of the customers you serve at home?

• As an overseas investor, how can you tap into growing regional or sector trends more efficiently than your U.S.-based counterparts?

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Do it nowImagine your company is a U.S. enterprise and that your planned investment won’t cross any borders.

• Sketch a version of your business plan based on this imaginary change. How do you rate your chances in the U.S. market?

• Identify the inflection points where this imaginary plan deviates the most from the real one you’re pursuing as a non-U.S. investor. Are these the specific differentiators that will help determine your market value?

Deloitte contacts

Marco Sguazzin Steve JoinerPrincipal PartnerDeloitte Consulting LLP Deloitte & Touche LLP+1 415 783 6860 +1 404 220 [email protected] [email protected]


8.What talent challenges and opportunities should you focus on?

U.S. organizations are looking for ways to shape a workforce that can help take on challenges like globalization, generational change, and technology change. This has led them to a new focus on talent assessment, learning, and leadership development. They’re willing to build skills, not just hire them.

About one-third of executives in a recent survey said leadership development and succession planning were top talent priorities, and they predicted this will remain the case over the next three years. Yet more than 80 percent admitted their talent programs needed to improve.5

As talent demands become global demands, executives will likely seek strategies they can scale for size and apply to regional needs. While other regions report talent gaps in R&D, strategy, and planning, many executives in the Americas are most concerned about leadership and operations know-how.

The rising American workforce will likely bring the power of social networking to bear on collaboration and innovation. And, in an environment that values accountability, companies will likely reward performance more than longevity.


A highly segmented job market

The U.S. economy continues to face comparatively high unemployment, which in broad terms could dictate an employer’s market and little volatility among existing workers. However, a closer look reveals micro-economies in which certain industries are already having difficulty hiring – from skilled labor positions to leadership roles.

If early signs of renewed growth take hold in the U.S. market, employees who rode out the recession in safety may seek mobility. That potential means companies should evaluate their retention strategies, including financial and non-financial incentives. It’s also important for companies to give employees a clear view of the future they anticipate – for the company, and for their own careers.

For companies just entering the U.S. employment market as investors in an established entity, identifying top performers and crafting a plan to keep them is a clear priority.


• Will your inbound investment involve new management of an existing workforce, recruitment of new talent, transfers from the parent company – or a mix of all three?

• Is your talent pool linked to the physical location of your investment, or can you use cloud computing and other means to draw the skilled from all over?

• What cultural norms do you take for granted in your own country that may not translate to the U.S. workplace?

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Do it nowIdentify the five most pressing differences between the workforce you have now (or stand to inherit shortly) and the workforce you envision as ideal. What will it take to turn one into the other? Which of those steps is worth the time and expense?

Deloitte contacts

Eileen Fernandes Kevin KnowlesPrincipal PrincipalDeloitte Consulting LLP Deloitte Consulting LLP+1 408 704 2513 +1 214 840 [email protected] [email protected]


9.What brand challenges does your investment present?

Broadly defined, a brand is the set of expectations the market applies to a named business entity. It defines how comfortable people are buying from you. From the standpoint of U.S. customers, your investment either introduces a new brand or changes the perception of an existing one. A misfire in brand strategy has the potential to undermine the value of other, more tangible decisions.

During a merger or greenfield process, your investment is your brand – it’s likely the principal thing customers know about you and may generate word-of-mouth activity or even media interest. Later on, attention like that will likely be expensive. While you’re getting this attention at no cost, it’s important to anticipate people’s interest and communicate a clear identity.

Brand perception has a large emotional component, and the cross-border aspect of U.S. inbound investment can amplify the emotions involved. No matter what the realities of your entity structure, you will be the new arrival – to some, the intruder. Your presence may challenge loyalties and bring cultural issues into sharp relief.

Brand is a message, and investors should manage it like one. What do you wish to convey to customers? To current and new employees? To stakeholders, investors, and regulators? Even if your brand is centuries old and inspires confidence at home, it may be a blank slate in the United States. Just as you engage attorneys and accountants to help you manage this transition, you may find professional communications counsel can be a valuable asset.

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9.What brand challenges does your investment present?

Broadly defined, a brand is the set of expectations the market applies to a named business entity. It defines how comfortable people are buying from you. From the standpoint of U.S. customers, your investment either introduces a new brand or changes the perception of an existing one. A misfire in brand strategy has the potential to undermine the value of other, more tangible decisions.

During a merger or greenfield process, your investment is your brand – it’s likely the principal thing customers know about you and may generate word-of-mouth activity or even media interest. Later on, attention like that will likely be expensive. While you’re getting this attention at no cost, it’s important to anticipate people’s interest and communicate a clear identity.

Brand perception has a large emotional component, and the cross-border aspect of U.S. inbound investment can amplify the emotions involved. No matter what the realities of your entity structure, you will be the new arrival – to some, the intruder. Your presence may challenge loyalties and bring cultural issues into sharp relief.

Brand is a message, and investors should manage it like one. What do you wish to convey to customers? To current and new employees? To stakeholders, investors, and regulators? Even if your brand is centuries old and inspires confidence at home, it may be a blank slate in the United States. Just as you engage attorneys and accountants to help you manage this transition, you may find professional communications counsel can be a valuable asset.


Taking a brand through the cross-border lens

Within one country, a brand’s strength and consumer confidence are often one and the same. That strength, however, doesn’t always translate when you enter into a new market.

Success stories are well-known, such as the emergence of Japanese auto and consumer electronics brands in the United States in the 1970s and 1980s, or the high performance of Scandinavian mobile phone brands in the 1990s.

But other brands had different experiences, even though their equity at home was just as strong. A major telecom company in China had difficulty entering the United States because of perceptions about national security, intellectual property rights, and workforce treatment. A major port operator set off a large controversy when it contracted to manage a handful of important ports in the United States, all because the company’s roots in the Middle East raised security concerns among some legislators.

Each of these stories is different, and there is no blanket lesson to apply – except to be certain you consider the target country’s cultural, political, and economic context when you take your brand there.

Do it nowHave your marketing or PR department (or agency) get you a clip file that shows what relevant U.S. publications have written recently about deals similar to yours, and about issues in the market you’re joining. Note the themes, the spins – and what authors’ bylines appear most often.

Deloitte contact

Kevin KnowlesPrincipalDeloitte Consulting LLP+1 214 840 [email protected]


• How will this deal play out in the U.S. media? Will it be a constructive profile in the business section – or a controversy on the front page?

• Who do you want to know about this? Identifying and segmenting your brand’s audiences can help you speak to each of them in a helpful way.

• What are the emotional issues you can’t capture in a spreadsheet or contract? Are they valid? How can you address them?

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Do it nowHave your marketing or PR department (or agency) get you a clip file that shows what relevant U.S. publications have written recently about deals similar to yours, and about issues in the market you’re joining. Note the themes, the spins – and what authors’ bylines appear most often.

Deloitte contact

Kevin KnowlesPrincipalDeloitte Consulting LLP+1 214 840 [email protected]


10. Once the deal is done, what’s your plan to drive synergies and generate sustainable shareholder value?

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Getting to a signed purchase agreement is only half the battle—and 20 percent of the work. The other half (and 80 percent of the work) is realizing the value from the transaction through smooth execution.

The history of M&A shows the majority of value creation or destruction happens after the deal is signed. Simply getting to close isn’t enough. Day One and every day that follows should provide benefits that reflect the reasons you opted for the transaction in the first place.

A worthwhile transaction requires the development and execution of an overall integration strategy that has support from the entire leadership team coupled with effective governance and a dedicated integration team.

One of the integration team’s first priorities is to promote business continuity through a credible, detailed plan that results in a smooth close on Day One and a speedy path to value capture through a thoughtful post-close, 100-day plan.

Driving a deal effectively to value creation means identifying the required sequence of activities and milestones, then lining up the tools that will help you achieve them. A Day One plan is part of that solution, but so is a much broader program to reduce risk, capture value, and provide visibility to internal and external stakeholders.


• Who will lead the integration planning effort? Will you use two-in-the-box leadership? What governance will you follow? What incentives will be put into place?

• How will you track synergies post-close? Will you bake them into budgets or account separately? How will you distinguish cost synergies from growth and both from on-going operations?

• What investments are required to complete the integration? How will you prioritize them?

• What messages do you need to communicate to shareholders or board members about goals and progress? How is that message different for employees? Customers?

• How are you managing risk? How is the enterprise considering U.S. regulations and reporting requirements at the federal, state, and local levels?

10. Once the deal is done, what’s your plan to drive synergies and generate sustainable shareholder value?


The seven highly effective habits of serial foreign direct investors

Committing to a U.S. investment is complex, but in retrospect, it may be the easy part. Following through on that commitment in a way that generates synergy can be difficult. Here are seven characteristics common to inbound M&A transactions that have worked:

Start early. Begin identifying synergies during due diligence. Make strategic use of clean teams post-announcement to jump-start detailed planning.

Aim high. To offset potential leakage and costs-to-achieve, set growth and cost synergy targets at least twice the size of the goals you discuss in public.

Use playbooks. Customer and employee playbooks can be your secret weapons for realizing the goals of a transaction.

Define the “after” picture. A well-defined end-state blueprint can help prevent organizational paralysis. An agreed-upon roadmap can accelerate progress.

Execute on Day One. Repeat. When the moment of truth comes, your plan is insurance against the unforeseen. Leading practices show carrying that same focus post-close through a series of 90-day execution waves helps drive results.

Be precise. The benefits from a transaction are the reasons for the transaction. They’re too important to get lost in the shuffle. Be specific in setting targets, assigning responsibility for them, and tracking the results.

Don’t forget people. A transaction shakes the ground under people’s feet. If you’re losing sleep over this, imagine how the people without direct control are feeling. Tackle the issue head-on with two-way, honest communications that keep everyone informed and invested.

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Do it nowDraft the presentation you’ll give to shareholders, customers, and employees at the end of the first quarter after closing that outlines Day One achievement of goals, growth and synergy plans, and the year one roadmap. Prepare a similar story projecting a year ahead for the first anniversary post-close.

Deloitte contact

Jeff WeirensPrincipalDeloitte Consulting LLP+1 612 397 [email protected]


Your move

Asking these questions should be an exercise in analysis, not paralysis. If you perceive an attractive U.S. investment opportunity, time is probably a critical factor.

The diligence this document suggests, and more, need not be a source of delay.

You’ve already made the decision to move. Making the right move takes the right resources and a clear eye. In answering the many questions posed by a U.S. investment, it helps to enlist allies. People who know the ground are valuable. People who know the ground and who have been through this process before, even more so.

In many ways, for many reasons, the United States has long represented a frontier for people and institutions around the world. The challenges inherent in coming here are very different from what they used to be. But as you embark on this journey, you’re in good company.


Talk to us For more information on direct investment in the United States, please contact:

Mark Garay Chief of Staff, U.S. & Global M&A Services Deloitte Tax LLP+1 202 879 [email protected]

For general information about M&A services, please email [email protected].

To learn more Visit www.deloitte.com/us/inboundinvestors

Endnotes1. U.S. Department of Commerce. Bureau of Economic Analysis. WIDESPREAD ECONOMIC GROWTH ACROSS

STATES IN 2011. N.p., 5 June 2012.

2. “Report for Selected Countries and Subjects.” World Economic Outlook Database, October 2012. International

Monetary Fund, October 2012.

3. U.S. Congressional Research Service. Foreign Direct Investment in the United States: An Economic Analysis.

By James K. Jackson, 2012.

4. “Central Intelligence Agency.” CIA World Factbook. U.S. Central Intelligence Agency.

5. “Talent Edge 2020,” Deloitte University Press, 2012.

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This publication contains general information only and is based on the experiences and research of Deloitte practitioners. Deloitte is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication.

About Deloitte

Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

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